What does Mehmet Şimşek think about the future of the economy? 'The most fundamental issue is inflation'

Speaking at Turkey's '2024 Berlin Global Dialogue' conference, Minister of Treasury and Finance Mehmet Şimşek stated that the country is coping with economic challenges and that the current account deficit is decreasing. Şimşek expressed that they expect inflation to fall to single digits and that they are evaluating opportunities in international trade. 

Şimşek noted that Turkey has benefited from the diversification of supply chains following the COVID-19 pandemic, stating, 'We have a comprehensive reform program that will help increase competitiveness, productivity, and potential growth. We are open to doing business and to dialogue.'

Şimşek spoke at the '2024 Berlin Global Dialogue' conference, which was held under the theme of 'Building Common Ground'.

Stating that Turkey was facing a large current account deficit a year ago, Şimşek reported that today the current account deficit has decreased and the budget deficit-to-GDP ratio, excluding earthquake-related expenditures, has fallen to 1.6 percent.

Pointing out that the budget deficit in Turkey is under control, Şimşek emphasized that the most fundamental issue on the macro side is inflation.

Şimşek noted that when looking at the disinflation experience in 56 countries after the 1970s, it took 3.5 years for inflation rates to fall.

Expressing that they are pursuing tight monetary and fiscal policies to anchor inflation expectations, Şimşek said they expect inflation to fall to single digits by the end of 2026.

Mehmet Şimşek at the 2024 Berlin Global Dialogue meeting

WHAT ARE THE INFLATION EXPECTATIONS?

Şimşek stated that Turkey has overcome many macroeconomic challenges and that more time is needed to overcome inflation.

Mehmet Şimşek said, 'Inflation will fall to single digits. We want to do this while achieving good employment growth.'

Sharing the International Monetary Fund's (IMF) analysis that 'fragmentation in global trade could cause a decline in global output of up to 7 percent,' Şimşek said this is equivalent to the combined GDP of Germany and France.

Emphasizing that the Turkish economy is resilient against fragmentation in global trade, Şimşek stated the following:

'The reason for this is that we have a full Customs Union with the EU. Thanks to this, we conduct trade with the EU based on rules. In this sense, Turkey is a friend to the EU through the Customs Union channel. We also see ourselves as friends with Central Asia, the Balkans, North Africa, and the Middle East. This is very important. When it comes to nearshoring, we have benefited from the diversification of supply chains after the pandemic. We have a rapidly developing near-abroad, including Europe and Africa. Therefore, the economy has high resilience. Furthermore, we have a highly competitive demographic structure and manufacturing industry capacity. Thanks to this, we have attracted 270 billion dollars in foreign direct investment over the last 20 years.'

'WE WANT TO RE-ENGAGE WITH OUR EUROPEAN FRIENDS'

Minister of Treasury and Finance Şimşek emphasized that Turkey is not a country 'suffering' from high debt, noting that the ratio of real sector, household, banking sector, and public debt to global GDP is at the 330 percent level worldwide, while this ratio is 250 percent in developing countries and 99 percent in Turkey.

Touching upon the investment opportunities Turkey offers, Şimşek explained that the country is a large economy with a national income of 1.3 trillion dollars.

Stating that the real GDP growth rate in Turkey has averaged 5.5 percent over the last 20 years, Şimşek said they are working for the country to grow more and be more resilient against economic shocks.

Şimşek said, 'We have a comprehensive reform program that will help increase competitiveness, productivity, and potential growth. We are open to doing business and to dialogue. Of course, we want to re-engage not only with the region but also with our European friends around us.'